Companies often try to approach innovation with the wrong assumption: “we need to come up with new ideas.”  They’ll start talking about thinking “outside the box,” when they want to find new ideas that they can turn into novel products, services or systems.  One common mistake that they make is that they try to come up with new ideas rather than focusing on existing ideas that are already on the table.  The problem is not one of coming up with ideas; rather, it is a problem with recognising good ideas.

It’s easy to find examples of companies making this crucial error in recent history. In 1975, Kodak developed the first digital camera but never moved forward with the idea.  They made the mistake of passing over this idea as a competitor, Sony, created another prototype and took the upper hand in the future of digital photography.

Xerox created the first Personal Ccomputer but instead of investing money into this technology, they let it slip through their fingers.  Steve Jobs’ company, Apple, took inspiration from that technology and transformed the computer industry

These examples aren’t meant to ridicule these companies for making a huge mistake, but to demonstrate that they actually reflect an opinion that many people share.  This opinion is a bias that tends to pit us against new ideas because of uncertainty.  In the past, and even now, many people and companies will lean towards investing in a “sure thing” rather than taking a risk because it MIGHT negatively affect the bottom line.

Testing the Theory

A study published by a team of researchers under Wharton’s Jennifer Mueller seems to support this observation.  The experiment involved the division of a group of research participants into two groups.  After the division, the researchers planted a seed of doubt in the minds of one group by telling them that they may be eligible for extra payment based on a random lottery.  The researchers were careful not to divulge any specific information about the participants’ chances of winning or how much the additional payment was.  They told this group that they would just have to find out after the study was over.  While this wasn’t significant, it was enough to plant the seeds of doubt in this group.

After this initial “planting phase,” the test subjects had to participate in two tests.  The first test was geared towards discovering their perceptions about creativity and practicality.  In this test, they were given two sets of paired words and were told to choose one.  The pairs of words were created by putting words together that were indicative of creativity (novelinventiveoriginal)  or words that were indicative of practicality (functionaluseful, constructive) with words that conveyed a positive (goodsunshinepeace) or a negative (uglybad, rotten) idea.  In each round of testing, the participants chose their pairings from phrases like “good original” or “bad practical.”  After the initial test, the participants were required to perform the second test, which was, designed to gauge their feelings about new, creative ideas.  In this test, they asked the subjects to rate their feelings about creativity and practicality on a 1 to 7 scale.

The results of the test showed that the people from the group that was subjected to the “planting of doubt” SAID that they placed higher value on creativity but in REALITY, they were partial to the practical word pairs over the creative pairs.

The Bias Problem and its Solution

These results suggest that we tend towards a more negative view of creativity during times of doubt, even if the uncertainty we feel is unrelated to the area where creativity is being expressed.  This may be one of the reasons that many innovative ideas, products, and services were rejected when they were proposed for the first time.  The implications in the business world today are particularly applicable.  Most CEO’s probably think they’re working in an uncertain industry.  This uncertainty often spurs the need for innovation but incidentally, causes these CEO’s and management level employees to reject new ideas that could potentially mean gaining a unique competitive advantage.

In an effort to rid your company of this negative bias, a solution might be to try to change the structure that the new ideas and theories must pass through; for example, replacing the traditional decision making hierarchy by making the approval process organisation wide.

Rite-Aid’s implementation

Rite-Aid is a company based in Rhode Island, in the USA and has been doing this for the past decade.  The company created an “idea-market”, called “Mutual Fun”, on their employee website where any employee can post an idea for improvement and list it as a “stock” in the idea market.  The company then gives every employee $10,000 virtual dollars to invest in ideas posted in the market.  When employees find an idea they truly believe in, they can “invest” in it, volunteer to work on the project idea, and when an idea garners enough employee support, management picks it up and runs with it.  When the idea is implemented, any profits that the company sees will result in the “investors” receiving financial returns based on their investment and volunteering.

Within the past few years, the company actually taken many ideas and has made significant financial gains.  These ideas and changes range from small changes to existing products to new industries. In the first year of this virtual “idea-market” being implemented, the ideas that Rite-Aid decided to use accounted for about 50% of their business growth.

While the monetary gains that Rite-Aid has enjoyed were significant, there was an even more important benefit to this process.  Their “idea-market” helped to create a community of dedicated employees whose ideas were recognised and valued.  In addition to boosted morale and employee loyalty, the system is based on the idea that every employee has valid ideas and that no idea is too small or too big.

Remember that innovation is not just about thinking up new ideas; it’s often more about recognising existing ideas that have not yet been fully developed.